Gradual softening continues
MONTREAL, Sept. 12 /CNW/ - Quebec's housing affordability deteriorated
across all segments in the most recent quarter despite modest price gains,
according to the latest Housing Affordability report released today by RBC
"While there was only a modest increase in house prices this past
quarter, climbing mortgage rates, utilities and taxes eroded Quebec's housing
affordability," said Derek Holt, assistant chief economist, RBC. "However, the
province's decent economic fundamentals still support housing markets with job
growth running at a healthy two per cent rate this year and incomes keeping
pace with gains in house prices."
According to the RBC report, Quebec's housing market has softened
gradually over the past two years. The orderly slowdown has seen the annual
pace of house price gains stabilize between four and five per cent. The
sales-to-listings ratio has averaged just under 0.6 per cent so far this year,
pointing to a market that is roughly balancing its supply and demand
conditions. Holt noted that the arrival of extended amortization mortgages has
changed the dynamics of the housing market. The new found ability to extend
amortization up to forty-year mortgages temporarily offsets affordability
pressures by rolling the clock back to late 2005 and early 2006 affordability
The RBC Housing Affordability report, which measures the proportion of
pre-tax household income needed to service the costs of owning a detached
bungalow, was about 36 per cent of income. The amount of median pre-tax income
required to purchase a condo in Quebec was about 29 per cent. For a standard
townhouse, the measure stood at 31.5 per cent and for a two-storey home at
44 per cent.
In Montreal, housing affordability deteriorated across every housing
segment, due to higher house prices, mortgage rates, utilities and property
taxes. However, among the big cities across the country, price gains in
Montreal's housing market are among the weakest at about three to four per
cent for the past two years.
"Despite weak spots in the local economy, Montreal incomes are growing at
a solid pace, thanks to a solid job market," added Holt.
The Housing Affordability measure, which RBC has compiled since 1985, is
based on the costs of owning a detached bungalow, a reasonable property
benchmark for the housing market. Alternative housing types are also presented
including a standard two-storey home, a standard townhouse and a standard
condo. The higher the measure, the more costly it is to afford a home. For
example, an Affordability reading of 50 per cent means that homeownership
costs, including mortgage payments, utilities and property taxes, take up
50 per cent of a typical household's monthly pre-tax income.
Also included in the report are housing affordability conditions for
Quebec City and a broader sampling of smaller cities across the country. For
these smaller cities, RBC has used a narrower measure of housing affordability
that only takes mortgage payments relative to income into account.
RBC's Affordability measure for a detached bungalow in Canada's largest
cities is as follows: Vancouver 71 per cent, Toronto 45 per cent, Calgary
45 per cent, Montreal 36 per cent and Ottawa 31 per cent.
Highlights from across Canada:
- British Columbia: Housing affordability eroded further across the
province as rising mortgage rates and house prices squeezed out
prospective home-buyers. The relief seen in the two-storey home
segment earlier this year was reversed this quarter with all four
home segments witnessing deteriorations in affordability.
- Alberta: Housing affordability deteriorated significantly in the
second quarter of 2007. Alberta's house prices have been growing at a
pace well above incomes and in a short time have created stressed
- Saskatchewan: The Saskatchewan housing market suffered its worst ever
quarterly deterioration of affordability on record. At the start of
the year, the influx of people caught the housing supply off guard,
forcing affordability to deteriorate. This momentum continued into
the second quarter as the pace of annual price gains soared into the
double digit range.
- Manitoba: With house price gains picking up pace and mortgage rates
continuing to rise, the province's housing affordability has
deteriorated for a second straight quarter. Manitoba saw the greatest
quarterly decline in affordability in more than a year.
- Ontario: After modest improvements earlier in the year, Ontario's
housing affordability deteriorated sharply in the second quarter. A
combination of higher house prices, rising mortgage rates and
increasing utility costs have forced a substantial deterioration in
affordability across all housing classes.
- Atlantic region: An environment of rising mortgage rates and strong
price gains created pricier second quarter housing conditions in
Atlantic Canada. While each of the housing segments witnessed a
significant affordability deterioration, it was the two-storey and
condo segments that saw the sharpest erosion.
The full RBC Housing Affordability report is available online, as of
8 a.m. E.D.T. today at www.rbc.com/economics/market/pdf/house.pdf.
For further information:
For further information: Derek Holt, RBC Economics, (416) 974-6192;
Raymond Chouinard, RBC Media Relations, (514) 874-6556; Jimmy Jean sera
disponible pour des commentaries en français.